No more conservative funds or fossil fuels for default KiwiSavers

Financial services sector welcomes the govt's KiwiSaver rule changes

No more conservative funds or fossil fuels for default KiwiSavers

KiwiSaver providers will now be required to place default members in balanced investment funds, rather than conservative, with the rule change taking effect in July 2021.

They will also be banned from investing in fossil fuel production companies and illegal weapons, though companies who sell fossil fuels but don’t produce them will still be permissible.

Finance Minister Grant Robertson said New Zealanders will see “more bang for their buck,” especially younger KiwiSavers who are more likely to be in a default fund. Commerce and Consumer Affairs Minister Kris Faafoi said the ban on investing in fossil fuel production “doesn’t have to mean lower returns,” and is a step towards transitioning to a low-carbon economy.

The rule changes have also been welcomed by Financial Advice New Zealand and ASB, who say they will help KiwiSavers in default funds avoid missing out on potentially significant investment returns.

“These changes will make a significant difference to the retirement savings of the hundreds of thousands of New Zealanders who are in a default fund,” Financial Advice NZ CEO Katrina Shanks said.

“Moving the settings up to ‘balanced’ will alone make a big difference, and if making fees more transparent drives them down, then the total change over a lifetime will be significant.”

Shanks said that the number of people in default funds who have not made the active choice to stay there is still a concern, but these changes will ensure that they don’t miss out on the best opportunities.

ASB’s executive general manager, private banking, wealth and insurance Adam Boyd says the government’s clarity on KiwiSaver is welcome, and that ASB customers are being informed around what the changes may mean for them.

“We are pleased to see the Government is changing the default fund settings from conservative to balanced,” Boyd said. “This decision aligns to feedback we gave to the Government during its 2019 default provider scheme review.”

“We believe the change from conservative to balanced will be more advantageous for default members, particularly those who don’t engage with KiwiSaver for a long time and miss out on investment gains,” he added.

“It’s also pleasing that the Government will be considering fees and their transparency when selecting a default provider.”

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